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Give Workers a Say on County Pensions

Give Workers a Say on County Pensions 

July 29, 2008

By JOHN MOORLACH - CHAIRMAN, ORANGE COUNTY BOARD of SUPERSIVORS
The Orange County Register

Six years ago the voters of Orange County approved Measure V, converting us to a charter county. It was poorly constructed, but we now have the opportunity to allow the voters to add provisions to the Charter that instruct the County's Supervisors on how to proceed on financial and business matters.

At today's Board of Supervisors weekly meeting the Board will vote on whether to put such a charter amendment before the voters on the November 4 ballot.

It may surprise many of you that the funding level of the County's traditional defined benefit pension plan is near that of the City of San Diego. Why this city has suffered more embarrassment over this fact is that they failed to disclose their large benefit debt in official bond issuance disclosure statements.

The City of San Diego has had to endure investigations by the Securities and Exchange Commission, the United States Attorney's Office, the Internal Revenue Service and their County's District Attorney. They've even received the moniker of "Enron by the Sea" by the New York Times.

As one of the City's responses to their pension funding crisis their Mayor put a measure on the ballot that would require the City's voters to approve an increase in future employee retirement benefits. It passed with 70 percent of the vote. Orange County's voters should do the same.

Why are we pursuing such a remedy? Recently approved 50 percent pension plan benefit increases have turned our fully-funded retirement plan into one that is only 73 percent funded.

Although we have enjoyed average investment earnings of some 10 percent per year over the last 15 years, you still owe the retirement system $2.7 billion. This works out to about $875 per resident. And we're paying 7-3/4 percent interest per year on this growing debt. Our annual contributions to the retirement system are 30 percent of payroll for this next fiscal year!

How did this happen? The Board of Supervisors negotiates with its employee bargaining units in secrecy. Closed session meetings are utilized to instruct county staff on how to proceed during the negotiations. Once the negotiations are completed the contract is voted on in a public meeting, but without much input from the taxpayers. This is because there is little time between the public disclosure of the agreed to salary and benefit increases and their approval by a majority vote of the Supervisors.

We have some 50 years of empirical data that shows that public employee unions have been successful in getting their candidates onto local elected bodies. This means that they literally negotiate with themselves.

The power of public employee unions should not be underestimated.
They raise a considerable amount of money for political purposes through their dues assessments. Their leadership is politically savvy. They recruit volunteers to put up candidate signs, walk precincts and man phone banks. And they are very clear in their communications to elected officials: "Vote for our salary and benefit increases or we will run someone against you or not assist you in your next run for another office." This makes it too easy for elected officials to capitulate to the demands of public employee unions.

What is the downside for an elected official to vote for retirement benefit increases? None. Due to term limits they can give away the store and let their successors worry about paying the bills. They've moved on to another office or oblivion with no concerns about future accountability.

What would a union leader tell future successors of these elected officials to do when they cannot afford the benefits? "Raise taxes.
The benefits were negotiated fair and square and now you have to pay them."

The proposed charter measure we will be discussing will allow you, the voter, to approve any negotiated increase in retirement benefits. The public employee union leaders will have to convince you to approve a ballot measure to grant the increase. This is not as easy as only convincing a Board majority (three County Supervisors), but it is achievable. This method has worked satisfactorily and successfully in the County of San Francisco. In fact, their pension plan is fully funded.

Our current Board of Supervisors should put this measure on the November ballot and you should vote to approve it. Your wallet is already taking enough hits during this recession. Wait until you see what happens to our annual pension plan contribution after this difficult investment cycle. It will go up. It just went up $400 million because our employees are retiring earlier and living longer. And you will have to pay for it, and your children, and your grandchildren. We need to stop the hemorrhaging from increasing. One way we can try do it is with this ballot measure.